HERMÈS - 2019 Universal Registration Document

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CONSOLIDATED FINANCIAL STATEMENTS STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

Our work also involved taking samples to check the consistency of the levels of cancelled internal margins in the consolidated financial statements by examining the margin made with the distribution subsidiaries.

Recognition of foreign exchange hedges – Notes 1.10.1 and 25 of the Notes to the consolidated financial statements

Description of risk Hermès International is naturally exposed to foreign exchange risk because the bulk of its production is located in the eurozone, but receives the majority of its sales revenue in foreign currencies (American dollar, yen, yuan, and other Asian currencies). The manufacturing subsidiaries invoice the distribution subsidiaries in their local currency, which apply an annual exchange rate on the scales established in euros. To hedge this risk and minimise the impact of currency fluctuations on its earnings, Hermès International uses firm or optional foreign exchange hedges, with the objective of hedging its net internal exposure on an annual basis. At 31 December 2019, the hedging of internal transactions in currencies for the next following year is close to 100%. We considered this to be a key audit matter due to the impacts of exchange rate fluctuations on the Group’s operating margin, which is the indicator the Group uses in its financial communication. How our audit addressed this risk As part of our work, assisted by our financial instrument experts, we: checked the existence, completeness and accuracy of the Group’s financial instrument portfolio by making confirmation requests to banks; s recalculated the fair value of a representative sample of instruments in order to assess the accuracy of their value; s verified the relationship between the hedges and commercial transactions for a selection of hedging operations, obtained and carried out a critical s review of the documentation of associated effectiveness tests in order to assess their eligibility for hedge accounting within the meaning of IFRS 9; examining the appropriateness of the information concerning these transactions presented in the notes to the consoidated financial statements. s Description of risk The Hermès International Group’s entities operate in many countries where tax legislation is different, may change and is sometimes complex. This situation, which generates large cross-border flows, can create risks and uncertain tax positions. On each closing date, assisted by the opinions of its advisers, the Management of Hermès International estimates the tax liabilities and uncertain tax liabilities to be recognised in accordance with the provisions of IAS 12 and the IFRIC 23 interpretation, applied early since the end of the 2018 financial year. We considered this to be a key audit matter given the high degree of judgement required by the management to assess risks and the amounts of tax payables to be recognised in sometimes complex situations. How our audit addressed this risk Our work involved: discussions with Hermès International’s Group Management and tax department in order to understand all the existing disputes and uncertain tax s positions identified; considering the management of the Company’s analysis of the risks, the corresponding documentation and any written opinions from external s advisers; collecting the relevant evidence to assess, with the help of our tax experts, the validity of management’s judgements to evaluate the probability of s the main risks occurring and assessing the reasonableness of assumptions used to determine the amount of the liabilities; Income tax – Notes 1.1.2, 1.19 and 10 to the consolidated financial statements

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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